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Why female board representation matters: The role of female directors in reducing male CEO overconfidence in corporate decisions

Author

Listed:
  • Jie Chen

    (Cardiff Business School, Cardiff University)

  • Woon Sau Leung

    (Cardiff Business School, Cardiff University)

  • Wei Song

    (School of Management, Swansea University)

  • Marc Goergen

    (Cardiff Business School, Cardiff University)

Abstract

We provide novel manifestations why female board representation matters. We find that male CEOs at firms with female directors are less likely to be overconfident as they hold fewer deep-in-the-money options. Female directors are associated with less aggressive investment policies, better acquisition decisions, and improved firm performance. This is the case for industries with high overconfidence prevalence, but not for those with low overconfidence prevalence. Finally, firms with female directors experience less of a drop in performance during the 2007-2009 financial crisis. These results are consistent with the view that female directors improve firm outcomes through reducing male CEO overconfidence in corporate decisions.

Suggested Citation

  • Jie Chen & Woon Sau Leung & Wei Song & Marc Goergen, 2018. "Why female board representation matters: The role of female directors in reducing male CEO overconfidence in corporate decisions," Working Papers 2018-12, Swansea University, School of Management.
    • Handle: RePEc:swn:wpaper:2018-12
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    More about this item

    Keywords

    Female board representation; CEO overconfidence; Investment; Firm performance.;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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